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Construction and Enforcement of Long-Term Coal Supply Agreements—Coping With Conditions Arising From Foreseeable and Unforeseeable Events—Force Majeure and Gross Inequities Clauses

Marvin O. Young, Proceedings of 27th Annual Rocky Mountain Mineral Law Institute (1981)

During the past twelve years, severe changes in economic conditions and the imposition of new regulations by governmental agencies have created many problems in the construction and enforcement of long-term coal supply agreements, i.e., performance over a term of five years or more. Some of these problems have inflicted serious economic hardship upon the seller or supplier. My experience has been as counsel for the seller or supplier, and the general approach of the paper will be from the perspective of a seller. However, the points discussed will be of equal interest to a buyer, although the buyer may [128] have a different point of view regarding some points discussed.

A long-term contract of any type is fraught with great risk and danger because of the inability of anyone to predict the course of future events. Any long-term contract involves significant exposure and risks for both the buyer and the seller. An important part of negotiating and drafting of a long-term contract is allocating these risks. My experience is that sellers and buyers often approach long-term contract negotiations and drafting without realizing that risk allocation is involved. Others have written generally about the allocation of risks in long-term contracts.1 It is my purpose here to concentrate on the treatment given in long-term supply contracts to future contingencies which may adverse